Nearly $9,000 for earlobe procedure: What's in a UMMC medical bill?

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Heather Waddell will be paying University of Mississippi Medical Center for the next year and a half after a doctor removed an earring back from her 6-year-old daughter Piper's earlobe.(Photo: Special to Clarion Ledger)

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Medicare, which sets reimbursement rates based on the cost of medical services, would have paid $1,348.03 for an identical procedure, but the hospital will receive more than $5,000 this time.

Waddell's insurance company, Cigna, covered $5,827.96 through the combination of a direct insurance payment and a discount Cigna negotiates with University of Mississippi Medical Center, home of the children's hospital.

Mom was left to pay $2,971.91 for the January outpatient surgery, which amounted to roughly 20 minutes of their three-hour hospital stay.

The procedure was so minor, Waddell said, "she even went to cheer practice that afternoon."

"What if she had had some major complication — if it was $10,000 for something minor?" Waddell said.

Indistinguishable markups

A study published in JAMA Surgery medical journal in February found the actual cost of operating room time in California averaged $36 to $37 per minute, which consisted of roughly $20 for direct costs, $14 for wages and benefits, and $3 for surgical supplies. Other studies have found costs ranging from $7 to over $100 a minute, depending on location and surgeon.

The studies did not show what hospitals charge for operating room time, but most — if not all — hospitals mark up the charges to patients to ensure profitable operations and room for innovation.

UMMC's chief financial officer Brad Sinclair said the hospital does not calculate actual operating room costs like this or use cost to determine the charge to patients. The medical center charges for operating room time in half-hour intervals.

Including surgical supplies, Batson charged Waddell more than $270 a minute, roughly seven times the cost of operating room time in California.

Even if its actual operating room costs were on the high end of the reported averages from across the country, UMMC's charge would amount to a 170 percent markup.

"I feel like I've been robbed," Waddell said.

Because the insurance company negotiated a discount of $3,700, or 42 percent of the entire bill, UMMC will receive roughly $159 a minute for the operating room time, still over four times the average actual cost in California.

Health care costs have skyrocketed in recent years, but that doesn't fully explain Waddell's high bill.

"There's the cost on a piece of paper, but everyone in the health care industry knows that's not the real price," said Jameson Taylor, vice president for policy at Mississippi Center for Public Policy, a conservative think tank that advocates for limited government and free markets. "Hospital list pricing is not transparent. It's not a reflection of what the hospital's actual costs are."

In the current health care climate, "costs" are more of an abstract notion than an actual number, Taylor suggested, and patients are left in the dark.

"Right now, the system is entirely against the consumer," Taylor said.

Of course, Piper was covered by insurance, so Waddell didn't have to pay the full bill. In fact, no one pays that full bill.

What's in the bill?

Every hospital has a chargemaster — a list of services and their corresponding prices. The chargemaster is full of bloated, seemingly made-up prices, often criticized as arbitrary and written off as irrelevant.

If Waddell had no insurance but was still able to pay, she would have received a standard 60 percent discount off the chargemaster rates, leaving her to pay $3,519 — $1,600 less than the hospital will ultimately receive for Piper's procedure.

If it were determined she could not pay, the hospital would write it off as uncompensated. As a non-profit, UMMC is required to provide a certain amount of uncompensated care.

Sinclair said the charges in the chargemaster are based on regional comparisons with other academic medical centers and the amount insurance companies are willing to pay.

"We also want to make sure any amount allowable by the insurance company to be paid, we're at least charging that," Sinclair said. "The payers still pretty much dictate what they're going to pay us. We have very little negotiating leverage to demand higher rates for specialty services."

Medicare reimbursement rates — which are set by the federal government and take into consideration the hospital's overhead, equipment and salaries — are often the baseline, with most private insurers paying much more.

In this case, the hospital charged more than six times the Medicare rate for identical services.

Asked how the set $7,892 charge for 30 minutes of plastic surgery in the operating room corresponds to the cost of that service, Sinclair said, "I don't have a great answer for that."

Factoring in the fixed costs of the operating room — the table, lights, anesthesia monitor — the cost per procedure is dependent on how many procedures are run through that operating room, Sinclair said.

The number of procedures does not inform the rates; however, the chargemaster prices are simply increased periodically.

Sinclair could not say what the hospital's profit margin is on operating room time. Generally speaking, however, outpatient surgical procedures are money-makers for any hospital. In UMMC's case, profitable procedures can make up for areas where the academic medical center performs other services at a loss.

Other charges in Waddell's bill are easier to break down, like the $10 charge for two acetaminophens.

With CVS charging 95 cents for a bottle of 30 Tylenol pills, that's a 16,500 percent markup, not considering the hospital's buying power.

Sinclair acknowledged the markups but said acetaminophen might have been $20 a pill at another hospital.

"We can empathize with that," he said. "The last thing we want is to ruin the great clinical experience with a shocking bill. We're not perfect at that but we do strive for it."

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Medical 'savings'

Piper's father was able to contribute more than $1,300 from his employer-funded health reimbursement account to the UMMC bill, leaving Waddell with the remaining $1,600.

Though the chargemaster rates are perceived as fictitious, insurance companies use them to boast about the savings they're getting consumers.

What's not shown is that a patient with no insurance — who hasn't been paying a premium every month — would have "saved" $5,279 automatically because the hospital never intended to charge the chargemaster price in the first place.

Waddell is now on a payment plan with the hospital and will be paying $95 every month for 19 months until the bill is paid in full.

"That was my only option, which is frustrating," she said.

Waddell said she strives to be financially responsible. Besides her mortgage, this medical bill is her only debt.

What's more, Mississippi has the highest medical bankruptcy of any state, according to an Urban Institute study released in 2017.

Medical necessity

If she would have known she'd be paying the hospital back until Piper is 8, Waddell said she'd have found another way to deal with the impacted earlobe.

"I didn't understand, first of all, why they couldn't have done local anesthesia," Waddell said. "They had to put her under for that minor incision."

But like most patients, Waddell felt she had little choice but to follow the doctor's instructions.

In a 2008 study in Pediatric Emergency Care medical journal, researchers reviewed 100 cases of embedded earrings. None required full anesthesia, though sedation can be necessary for younger patients. Local anesthesia was used in 72 cases and an incision was required in nearly half.

The report's author, Dr. Nathan Timm, a pediatric emergency room physician at Cincinnati Children's Hospital Medical Center, said the fact UMMC deemed the operating room and a plastic surgeon necessary meant Piper's case was likely more complicated than those they saw during their study.

Dr. Christopher Anderson, who chairs the UMMC Department of Surgery, stressed in a statement that surgeons only recommend medically necessary treatment.

"In addition to the best possible long-term results, these decisions must take into account a patient’s safety, comfort, pain control and to some degree cosmetics. We wholly support the decision of our pediatric plastic surgeon to perform this particular procedure in the operating room with the use of anesthesia, which was felt necessary in order to achieve the best overall outcome for this child," the statement said.

Cigna told the Clarion Ledger it encourages customers to ask their regular physician if services can be provided in a less expensive setting than a hospital and research costs before having elective, non-emergency surgery.

"If a person has questions about a bill that seems higher than expected, request an itemized bill and compare the charges to the explanation of benefits their health care plan provides before paying the bill," a Cigna representative said in an emailed statement.

For patients with high deductibles, Taylor recommends asking questions and trying to negotiate payment before running the insurance. He said he's had success negotiating his bills down between 30 and 50 percent.